Deutsche Telekom, Perplexity unveil affordable 'AI Phone' under $1K

It was bound to happen at MWC in Barcelona this year: at least one carrier would team up with a top AI company to launch a smartphone. And guess what? Deutsche Telekom (DT) did just that, announcing their "AI Phone," a budget-friendly device developed in partnership with Perplexity, Picsart, and others. They've also introduced a new AI assistant app called "Magenta AI."

DT plans to unveil the device later this year and will start selling it in 2026 for under $1,000. Initially, it'll be targeted at the European market, according to a spokesperson from TechCrunch.

"We are becoming an AI company," declared Claudia Nemat, a DT board member in charge of tech and innovation, at a press conference on Monday. She quickly clarified that DT isn't building foundational large language models, but rather focusing on AI agents.

Perplexity, a Silicon Valley startup now valued at around $9 billion, is playing a crucial role in the phone's development. This move signals how the startup, known for its generative AI search engine, is shifting towards creating more "proactive" products.

"Perplexity is transitioning from just being an answer machine to an action machine," said Aravind Srinivas, Perplexity's co-founder and CEO, during the event. "It's going to start doing things for you, not just answering questions. It’ll book flights, make reservations, send emails and messages, place phone calls, and set smart reminders."

While this seems to be the first time Perplexity has partnered with a carrier to develop an AI interface for a smartphone, they already have some experience with assistants. They launched an Android assistant in January, which could serve as a template for this new "AI Phone."

This news is just the latest chapter in the telecom industry's ongoing saga. For years, carriers have been looking for ways to compete with tech giants like Apple and Google, who control the operating systems and phones that largely sideline telecom companies from app profits and customer relationships. We've seen past attempts like the partnership with Mozilla to create the Firephone, which didn't exactly set the world on fire. There were also close ties with Facebook (now Meta), which has since shifted its focus elsewhere.

Moving fast and breaking things isn't really the telecoms' style. Perplexity and Deutsche Telekom have been collaborating since April 2024, and DT first mentioned an "AI Phone" at last year's Mobile World Congress.

Nemat didn't spill the beans on the hardware details like specs or the manufacturer, nor did she mention the operating system (though it looks like a version of Android from the concept renderings). We reached out to DT, and a spokesperson said these details will be revealed later this year.

Nemat did mention that the phone will have AI integrated throughout, with the experience crafted by Perplexity "so that you can experience the full Monty," she added: "AI on your lock screen."

The phone will also include AI services from Google Cloud, ElevenLabs, and Picsart, according to DT.

Magenta AI, the app-based version of DT's AI assistant, will be available for existing DT customers to install on their own Android or iOS devices, Nemat said.

Jumping on the AI bandwagon, which is all the rage at MWC this year, the AI Phone is DT's latest effort to connect with consumers through a key piece of hardware, alongside an app for those who won't buy their own device.

For Perplexity, the company is up against well-funded rivals like OpenAI and Anthropic in developing new AI tools for consumers, as well as tech giants like Google, which has integrated its Gemini AI into its search products. By moving into "action" services in partnership with a telco, Perplexity gains a bit of an edge, at least for now.

Perplexity is focusing on the next phase of enhancing user experience through AI. "These are the kinds of things that, earlier, you would have to do in your own way, learning how to use these different apps," Srinivas explained. "All these things are going to start becoming easier so that you can focus your time and energy on problem-solving... This is really the next phase where AI [is] going to transition from being just reactive and having you input prompts into something that's just natively there on your phone, always listening to you and being able to proactively assist you."

It's still up in the air whether DT and Perplexity can make a dent in the tough smartphone market, which is dominated by a few big players and has seen even giants like LG throw in the towel. Nonetheless, it shows just how irresistible the AI trend is right now, how even traditional companies see it as a potential cure-all, and how cutting-edge startups are seeking secure niches in a fiercely competitive landscape.